Online retailing: the great Australian gouge

Australians are paying far more than overseas consumers for an extensive range of products, despite the Australian dollar surging past parity with the US dollar. A Crikey analysis shows consumers sometimes pay more than twice as much for identical products sold in the United States, the United Kingdom and elsewhere.

The high comparative costs of books sold locally and the inexplicably higher prices at Apple’s iTunes store for Australians are well known. But the price differential extends across a number of products. The results further discredit the campaign by Australian retailers to target online shopping by demanding the government lower the GST threshold on goods purchased overseas.

In response to a Crikey piece showing the flawed maths behind the retailers’ campaign and claims wholesalers were stifling local online retailers, a number of readers pointed out alarming disparities between local prices and prices available online:

Pentax lenses costing nearly $850 locally are available for US$510 from a US site.

High-end audio equipment costs three times as much here as overseas.

Harley-Davidson rider Greg Bean sent extensive details of the remarkable lack of a price differential between Harleys sold in Australia and New Zealand, despite the different currency. Based on comparative dollar values, local Harley fans can expect to pay one-third more for the same bike here than in New Zealand, and for top-end models up to $9000-$11,000.

Cycling equipment: tyres costing $50-70 locally available online for less than $30; bike chains costing $50-60 available for under $40 from UK sites; cassettes costing up to $100 here are available for under $50 overseas.

A comparison of other goods using local and overseas sites readily yields more examples.

Even some cars are substantially cheaper. The same model Mazda6 costs under US$28,000 on the road in America compared to $47,000 here, a difference far in excess of the tariff of 5% still imposed on Australian consumers to prop up local manufacturing.

The one product Crikey examined that was competitive was television sets: large plasma TV sets cost about the same at Harvey Norman here as they cost in the US, and in fact may become slightly cheaper as the dollar rises.

The standard line from Australian retailers is that these price differentials are driven by the high cost of operating retail outlets in Australia — that they face high rent costs not faced by online retailers overseas, and they have to pay higher wages than US retailers.

That, however, doesn’t explain the differential in prices in niche products with minimal retail footprint like high-end audio or brand-name motorbikes. And it certainly doesn’t explain why online prices are higher in Australia.

Apple’s charging of Australians more for the same stream of 0s and 1s compared to Americans continues — the new Beastie Boys album currently costs Americans US$9.99 but more than twice as much, $20.99, via iTunes in Australia. And users of the game purchasing site Steam have long complained about price differentials on the site between Australian and US games, reflecting the pricing policies of distributors, with some popular games titles costing more than twice as much here as when downloaded in the US.

This “international price differentiation” is one of the issues under investigation by the Productivity Commission in its review of the retail industry. Katrina Lee, strategic policy adviser for Choice, says they want to see the PC inquiry focus more on the problems faced by consumers.

“The question is why bricks and mortar retailers can’t keep up and compete with online competitors,” she said. “Australians do want to buy locally, and there are successful local online retailers, both bricks-and-mortar operations and pure-play online operations. But the large retailers have relied on bricks-and-mortar outlets and offer limited sites and consumers are sick of it.

“Retailers blame the appreciation of the dollar but it should be reducing their costs too and we’re not seeing that.”

*Know of more examples of big price differences between the same product sourced locally and overseas? Crikey is compiling a list — send your tips to boss@crikey.com.au.

Correction: this article originally said the comparative data for Harley-Davidson motorbikes was between Australia, the US and New Zealand; the data only relates to Australia and New Zealand. Price differences between Australia and the US are greater still than those between Australia and New Zealand.

I buy content for the Amazon Kindle App on my iPads (I have two) one linked to an Australian account, one to an American. For some eBooks, the Australian edition is cheaper. Usually, the American one is less expensive. The price is set by the respective publishers who have the e-Book rights in the different markets.

Comparing prices with prices in America can be tricky, as all US prices are before taxes. There can be State taxes, and local (ie municipal) taxes - this explains why in some areas there will be an abundance of shops and outlets on one side of a road, and nothing on the other. Nevertheless, almost everything is cheaper in America - except tipping!

I looked at these economics with a curled lip firmly in place. When I returned to Oz from Europe I was aghast at the price of things here. A good example is The Economist itself: in Australian dollars, it is $117 in the US, $155 in the UK, and a whopping $365 here, all for a year’s subs. No, the difference isn’t postage, it’s just much cheaper in the US.

The bike parts one is always a bugbear for cyclists and local bike shops are taking a hammering from the amount of business that goes to the major British online shops. I’m assuming it’s more complicate than this, but on the surface the price differential certainly appears to be pronounced when importer/distributors are part of the supply chain - Specialized dropped their prices after establishing a local office and Giant might even be a shade cheaper than the US equivalent, but the majority of the other brands get marked up. Tyres are often double the prices available online!

I was at the filming of the Australian “Top gear” TV show the other day, where they did a piece on some big fast 4 door jag. I just can’t remember which one it is. The presenters loved the car, but said it was ridiculous. The car is over $400,000 in Australia. Same car in the US? Just a smidge over $100,000.

I’m not sure it is fair to compare prices with the largest unified single-currency market in the world, with >300 million consumers, to one of the smallest and geographically isolated — and thinly spread over the 6th largest country — in the developed world. (Actually, let me change that statement: I am sure it is unfair and unreasonable.) I haven’t done any comparisons recently but I am pretty sure most of Europe would compare equally unfavourably to the US. And then there is Japan where even Japanese goods cost more than in the US.

But, ok, an impartial expert look at the issue would be welcome, even if I remain rather more sceptical than BK about PC reports especially following the one on PIR which completely ignored international copyright laws and shipping costs. Comparing like with like would be a start: so comparing US online book prices with bricks-and-mortar stores in Oz is not the correct comparison; US bricks-and-mortar bookstores are having all the same troubles surviving as here. And with such a tiny market Australian online stores can not possibly compete with the behemoths in the US.

Incidentally Apple iTunes took forever for Apple to introduce to Australia, entirely due to prolonged negotiation with the big labels. Clearly for them to be bothered with such a small market they expect higher margins, and probably in the end it was not worth Apple’s effort to resist it for the same reason. (I believe the long delay shows that Apple did resist it.) Of course it is copyright law which divides the world into regional markets that prevents Apple selling us music etc over the internet from their US sites at US prices.

Bally 2.00 pm: quite a bit of the difference is postage; our market is too small for it to be printed here so it is air-freighted in.

Intrepid Travel offers anomalous pricing for its holidays depending on what country you register as ‘your’ country when on their website. For example, for the ‘Spirit of New Zealand Northbound’ tour, if you are on their USA website, the displayed cost is US$3,715 while if you are on their Australian website, the displayed cost for the same tour is AU$4,225. Hmmm …

One thing I do wonder about is if the Australia / US free trade agreement has any effect on the US based companies like Apple and Valve/Steam being able to actively discriminate against Australian consumers?

eg. does the FTA provide Australians with some right to the same price as US consumers for exactly the same packets of 1s and 0s probably delivered from the same server?

With steam, it isn’t even that they are charging US customers $50USD and Australians $90AUD, they are charging Americans $50USD and Australians $90USD. The price discrimination is naked, it’s amazing. Revolutions have been started on less.

Wish I could believe you Michael, maybe a smidge on population density but that’s about it. For online retailers, geography shouldn’t be a hurdle except for the price of postage, especially when a lot of goods eminate from Asia….

Price discrimination is rampant, but the wealth of information and knowledge savvy consumers now have at their fingertips from the internet is surely helping.

And discrimination is not just Australian either. I have used a UK credit card to price check a hire car in the US, then used an Australian visa card, Australian is half the price!

Also try bookdepository.com vs bookdepository.co.uk and the prices are usually different, same address, no VAT.

If Australian retailers are too slow on the march to online sales then other countries will and have taken market share….Retailers want a free market flogging off overseas goods, well that extends to services I’m afraid….

It’s thoroughly reliable, tells you how much you’ll pay for imported goods including postage and agents’ fees (and returns) and is organised from a state in the US that has no state taxes. This site has a human face, a published address and phone number and a verifiable record of success.

Apple products can be legally purchased for Australians through this nifty business, for example.

Fantastic, just received an email from an Australian online retailer today, stating my order is shipped “subject to availability” even though when I placed the order it clearly said “available”. And to rub it in even more, stating “shipping can take 21 days to deliver”. What, is it coming by boat? It’s just a piece of clothing!

They want the market to determine the price but, want to disregard 70% of the market and bullshit to us.
Do you know the some countries and providers still have, or have rediscovered people skills. They want your custom and are prepared to be humble, helpful and grateful for your custom. Hardly Normal cant wait to piss you off so they can jab some other poor bastard.

I’m not sure it is fair to compare prices with the largest unified single-currency market in the world, with >300 million consumers, to one of the smallest and geographically isolated — and thinly spread over the 6th largest country — in the developed world. (Actually, let me change that statement: I am sure it is unfair and unreasonable.)

Why ?

I haven’t done any comparisons recently but I am pretty sure most of Europe would compare equally unfavourably to the US. And then there is Japan where even Japanese goods cost more than in the US.

In Europe, however, the price differentials are almost entirely due to duties and taxes aimed at propping up local markets - and they’re still not as large as they are here.

Bally 2.00 pm: quite a bit of the difference is postage; our market is too small for it to be printed here so it is air-freighted in.

I struggle to believe there isn’t a printer locally who they could contract with.

An important fact to remember here is a large, large proportion of these goods are all be manufactured in China, Taiwan, and the like anyway - so shipping to Australia should actually be _less_ expensive.

As I am soon heading home to Australia after a couple of years living in the USA, I am busily buying up a whole household worth of stuff to send back in the container. I estimate I’ll be able to save around twenty grand, even after accounting for the container and loading costs. I just wish the rules for importing vehicles weren’t so ridiculous, or I’d bring back a couple of motorbikes as well.

Personally I believe the average Australian would be willing to pay 25%-30% “more” to support the local market, greater peace of mind, better customer service, simple recognition of a smaller market, etc, etc. I know I would. However, price differentials of 150%, 200%, 300% or more, are just flat-out gouging (even if not by the actual retailer), and no-one is going to put up with that when there are easy options.

On bike parts, talking to an acquaintance that runs a local shop, his view was it’s the distributors who are making a killing. He cited an example of a pedal company that dropped the local distributor and started selling pedal cleats for less than half what the distributor charged.
From my experience and from talking with other road racers, we only use the locals for a bit of servicing or an emergency part. It’s understandable when I paid $4250 including duties and freight from Germany for a bike that was $9000 here. Interestingly, there are an increasing number of small operators who run online stores that source high-end components direct from the Taiwanese manufacturers that build for the named brands. You can get carbon wheels for a lot less than the big brands. So for wheels that are $3000 here, you can pay $1500 from the UK, or $1000 from someone like boydbikes.com.

Another example dear to my heart is the cost of a software suite, ArcGIS. A desktop license for a component is $15000 in the US and sells for over $40000 here. I know a few companies that have bought the software through a US parent that hosts the license server while they consume it here.

Apple products can be legally purchased for Australians through this nifty business, for example.

Just a word of warning that the standard warranty on Apple equipment will not cover you in Australia, for products purchased overseas. If you purchase the additional Applecare warranty, however, that includes international coverage.

The same is true of many electronics products - another one that springs to mind is digital cameras: compact (ie: non-SLR) digicams are rarely covered by their warranty internationally.

The greatest differential I have experienced was for a Timex watch which bricks’n’mortar here in Oz had for the RRP of $189. Online from an Oz store was $150 and I eventually bought it online from the US for AU$50…including postage (10 days).

Warranties are fully covered as the relevant address/purchaser is an agent in the US (in Oregon), not Australia. This is explained on the Australian web site. It’s just completed its first 15,000 sales and has been very successful.

I just spent $1300 (including postage) importing some high end saddlery.
I could not find the identical products anywhere in Australia for less than $2100.
Prefer to buy Australian wherever I can, but I get really pissed at getting ripped off that much.

DrSmithy :- Buyer and supplier power counts for a lot. As does business strategy. If I am a big retailer, like wallmart and amazon, I can negotiate with international manufacturers to sell products to me for lower prices (as I will buy in bulk). I can then sell many of these products at a reduced price and still be quite profitable (I will have lower margins, but a corresponding increase in the number of sales should ensure my profitability).
Unfortunately, in Australia, this low margin, high turnover strategy doesn’t really work for big ticket items (as we don’t have the large consumer base that the US or Europe has). That explains why cars, harley davidson’s, fridges etc cost more here. Retailers need the higher margins to make up for lower number of sales.
While currency is important in costings, there are a whole number of other considerations that go into the cost of a product. I think BK is being a little simplistic in his claims of Australians being “price gouged”

Warranties are fully covered as the relevant address/purchaser is an agent in the US (in Oregon), not Australia. This is explained on the Australian web site. It’s just completed its first 15,000 sales and has been very successful.

Yes, I know how PriceUSA works.

My point is that your device will not be covered by a warranty *in Australia*. So, if it breaks, it needs to be sent back to the USA (5-10 days shipping each way - possibly at your cost - plus probably another 5-10 days actually having it fixed/replaced) and hope whatever it is that has gone wrong is actually covered by the warranty.

Buy Applecare, and you can take your device into any certified Apple seller in Australia.

The lack of differential between Australia and New Zealand extends to more than just bikes.

For example, a pair of Converse Chucks are NZ$70-80, which is about A$50. In Australia they’re A$70-80 or more.

In Malaysia, you can get them for A$30 from the (legitimate) Converse Store.

As to games, the reason is Australian retailers cried foul when Steam and other download services released games so cheaply.

Retail outlets and the Australian publishing arms of the various companies involved basically threatened online distributors by threatening to ban their boxed product from their stores.

Turns out this was all for naught, as game sales have tumbled world wide, game costs are still very high, and publishers now turn to Facebook and iOS to make a quick buck thus bypassing retail regardless.

You must be disingenuous? You think a company like Amazon that dominates online retail for a market of 300 million domestic customers doesn’t wield this power to negotiate the best wholesale prices in the known universe from suppliers/manufacturers? Scale in retailing is almost everything.
How many Harleys get sold in Oz each year versus the US? And Jags for that matter.

Of course I am sure there is some degree of price gouging but, as usual, BK’s call for examples is producing a mishmash of the good, bad and ugly.

Not only do we suffer from a small and widely dispersed market, and high shipping costs (and not just distance, relative low volumes) but we have shot ourselves in the foot several times over: some of the most absurd real estate costs in the world, especially commercial rents, combined with high labour costs (compared with the US but also to much of Europe).

I’m just back from 5 years in the UK and am appalled at the completely rubbish, rip off treatment Aussie consumers are getting.

Like Dr Smithy above, I did a big shop before leaving the UK, buying kitchen gear, clothes and books. Thank goodness. But I only wish I bought more.

I cannot understand the outrageous prices!

We just bought a stroller for under Au$500 from Amazon US (inc shippping) versus the exact same model for just under $1,000 in a shop in Aus. And it arrived in 6 days! How can retailers claim shipping costs for the high prices here when Amazon US only charged us $15 postage for a bulky stroller?

And baby clothes! Good grief! I just stocked up at Marks and Spencer (UK dept store) and even in pounds plus postage, they are cheaper. For example, a 3 pack of all-in-one jumpsuits is £11 ($16)… A single Bonds jumpsuit is $20. WTF?!

I really can’t feel very sympathetic to these sheltered, limited, technophobic protected retailers. Guys, this is how capitalism works.

Emily, has hi-lighted another reason - where I am, (1/2 way between Sydney and Brisbane) the normal delivery time for Australian sourced items is usually between one and two weeks. 6 days from the other side of the world is just another reason to buy on-line and avoid our own home-grown Australian gouged delivery delay

“•Pentax lenses costing nearly $850 locally are available for US$510 from a US site.
•High-end audio equipment costs three times as much here as overseas.
•Cycling equipment: tyres costing $50-70 locally available online for less than $30; bike chains costing $50-60 available for under $40 from UK sites; cassettes costing up to $100 here are available for under $50 overseas.”

But they may only sell one or two of these items _a year_.
They do need to make some profit you know.

“•Harley-Davidson rider Greg Bean sent extensive details of the remarkable price differential between US and Australian Harleys — and the even more bizarre lack of a price differential between Australian and New Zealand Harleys, despite the different currency. Local Harley fans can expect to pay one-third more for the same bike here than in the US, and for top-end models up to $9000-$11,000.”

You can’t get Harleys in USA for anything near the retail price. The dealers always sell only up-spec models or refuse point blank to sell at RRP.

“I’m not sure it is fair to compare prices with the largest unified single-currency market in the world, with >300 million consumers, to one of the smallest and geographically isolated — and thinly spread over the 6th largest country — in the developed world.”

Australia is the MOST urbanised country in the world excluding antion states like Singapore.
And virtually all the poplulation lives in just 4 cities, not “thinly spread” at all.

You think a company like Amazon that dominates online retail for a market of 300 million domestic customers doesn’t wield this power to negotiate the best wholesale prices in the known universe from suppliers/manufacturers? Scale in retailing is almost everything.
How many Harleys get sold in Oz each year versus the US? And Jags for that matter.

Except even things that aren’t being sold by huge retail monsters like Amazon, are still 1/2 to 1/3 as much.

Further, I struggle to see how the conditions you are described could produce price differentials of such magnitude without some other influence.

I am just glad I am leaving friends in the US, and keeping my bank accounts and credit cards open, so that I will never have trouble purchasing items from there in the future.

Someone, somewhere, is making shitloads of money from gouging Australian consumers. One way or another, that’s going to change - either their prices will have to come more inline with worldwide norms, or they’ll go out of business because everyone will buy overseas.

Scott/Michael, in consideration of items other than “large” items and buying power, yes I agree however Amazon didn’t exist several years ago. Why couldn’t an Australian retailer be the 1st mover and sell to the world? Or should we only accept monopolies if they’re Australian based (let alone Australian owned)….

Three weeks ago I purchased-on line, from America- two dozen assorted nail polishes. A week later they arrived. The products come in a huge range of colours, and are made in the USA.

In Oz we make some excellent nail polishes but nowhere near the colour range available to America. (I realise that 300 million people presents a much wider market). Also they have to compete with the imported products made in France, the United Arab Republic, and the USA. And people wonder why the Oz manufacturing industry has had the guts kicked out of it? Oh, and I paid 50% of the average price available in Oz.

Trust little Johnny Howard to have done a ‘Free Trade’ agreement with America. It’s a free trade for America but what do we get out of it?

HARLEY DETAILS: Please note, the price differences shown on the link are comparing Harley prices in Australia and NZ. It is even more outrageous when compared to US prices.

The link shows 2011 price comparisons for every HD model.

It shows we pay 1/3 more for an HD in Aus than in NZ.

Prices for both Aus and NZ are set by HD Aus in Ryde.

Imports for Aus and NZ are by HD Aus in Ryde.

NZ pays 15% GST to Aus 10%.

The NZ market is smaller and thus less profitable.

By rights HD’s should be more expensive in NZ but they are 1/3 less expensive there.

HD Aus has virtually an identical price list for both Aus and NZ that does not consider the strength of the Aus currency. For example: 2011 Electra Glide Ultra Classic is ~ A$37,000 and also ~ NZ$37,000. It should be ~ A$27,750 and ~ NZ $ 37,000 based on exchange of NZ$1 = A$ 0.75.

That’s ~ A$9,250 more in Aus than NZ without justification!

If compared to the U.S., Australians pay almost $15,000 more!

All arguments about market size, volume, taxes, shipping are not valid when HD Aus can sell bikes for 1/3 less in NZ than in Aus!!

This list goes on. Eyewear frames are also ridiculously overpriced here. I have just purchased a set of designer label frames from a US based onliner (inc. postage) for about 40% of what the retail store here charges. I could have bought the prescription lenses online too, but then claiming on my private health insurance would likely be problematic. Still, my total cost, online frames plus Aussie lenses (less rebate), will still be considerably less than what I would have to pay an Aussie retailer just for the frames alone.

Courtesy of Greg Bean pointing out my error, I’ve corrected the piece re Harley-Davidson bikes and noted the correction. I’ve also done some price checking to confirm that the disparity between Harleys available here and in the US is even greater than between here and NZ, in one case ~80% higher.

I recently bought a couple of box sets of DVD/Blu-rays from Amazon UK (who happily ship them here unlike Amazon US). Well under half the price of the same at JB Hifi or EzyDVD in Oz and delivered to my door (free postage) from Glasgow via Germany and Abu Dhabi in 3 business days! I want to support local business, but not at that sort of price difference.

Yes, Amazon and large retailers in the US and UK markets have the power to negotiate lower wholesale cost prices on items. But they’re also being supported to do that in the market by the product manufacturers themselves, who are often funding those huge discounts. It seems that manufacturers in Australia are old-fashioned too and don’t want to take a chance on online retailing because no retailer has taken the lead.

Most people don’t realise that Amazon react to the market — they price match rather than set their own pace. So their prices reflect their local competition. This ends up meaning that no one is making any money at all on many products in the domestic market. It’s great for OS consumers though.

It won’t be long until Amazon set up an Amazon India, I imagine – and this will be a pathway to setting up in Australia…

Isn’t it interesting to see some of the “gouging apologists” jump through hoops trying to justify the local prices ? What a pitiful series of excuses they offer. But the truth is undeniable: It is cheaper for individuals to buy at US retail prices and have the items shipped one at a time to Australia.

I’d like to see some of our alleged journalists do some digging and show exactly who gets what with the Australian prices. But you can be sure the local rip-off merchants will guard that information very carefully.

I’d like to buy locally, but locals merchants generally aren’t interested in competing. They want to hang on to their margins while simultaneously squealing about unfair competition.

I have tried to buy casual shoes recently Asics Tigers first and then Fitflops just the other day. The fitflops would have been $122US (before postage), they were $200 in the shops here.
I had to buy the Fitflops here (for a present) because you can’t get past a certain point on the Amazon USA website, you are told you are not allowed to bring them into Australia and yet I have heard of other people bringing in more formal shoes. Is there a difference or did I do something wrong? It almost seems like protectionism in Australia to protect the local retailers.
Asics (and Fitflops although they’re not as well known) seem hugely overpriced in Australia. Someone’s making a lot of money.

As a (now small) online retailer myself, with years of experience in the IT and electronics market, I can verify that it is the wholesalers/distributors who make sure the Australian prices remain high. One of the main products that I sell is made in Europe. Due to an “exclusive” agreement that manufacturer has with a sole wholesale distributor in Australia, I am forced to buy from that distributor; the manufacturer will not sell to me directly even though their “factory door” price is nearly 50% less than the wholesale Australian price. And, in the last two years, the exchange rate has improved by over 20% but guess what? the wholesaler’s price to me has stayed exactly the same…
This is not an isolated example. Most technology manufacturers, from Apple down, have a local subsidiary and/or distributor that both sets the prices and bans competition. So it’s not the retailers (although I’m sure the big boys can share some blame), it’s the system!

These comments highlight that the AUSTRALIAN COMPETITON AND CONSUMER COMMISSION (ACCC) is either in collusion with these organisations or is competely incompetent.

The ACCC is the same group that cannot develop a policy to manage petrol price setting or food chain gouging, and frankly since blind freddy could solve these problems one can only assume collusion.

For example, if the ACCC said petrol prices could only be adjusted once a week and must be publicised 1 week in advance, the petrol price would stabilise tomorrow. Competition would be honest and consumers would not be screwed by daily fluctuations.

Middle men cannot control a free market! Only Government collusion permits this to occur!

Pity we cannot buy our groceries on line from overseas sellers. There was a recent report that Australians pay among the world’s highest prices for groceries due to our food store duopoly.(Government has found it just to hard to do anything about the problem)
People are buying on-line for the prices but also for the convenience and the wider choice. The business model of Gerry (unAustralian) Harvey and his mates is crook. Drive through traffic to a shopping centre, probably pay for parking, make your way through a coughing and sneezing crowd to the store and try to attract the attention of a bored shoppie who will tell you what you want isn’t in stock. Compare to a wide choice and reasonable prices from Amazon with home delivery in about a fortnight.

Music equipment such as instruments and recording gear is ridiculously expensive down here. Furthermore there is a very limited selection on offer.
I have priced up trips to the US and am busy saving to make the trip worthwhile. Generally the price is about 1/3 of that here.

Try that Australian Kogan site for electronics etc , cheap tv’s ,i purchased a Cyclonic bagless vacuum cleaner for $69 on a friday deals and $25 del. He is in Melbourne and i am in qld. Works well and came with a power head and acc’s . You can leave feedback on his site (Bad and Good ). You can buy cheaper new models by buying in advance and having a delivery date a month ahead. He seems to want to build stuff that his customers ask for ? Gerry would never do that , just box A or Box B .

Just purchased a keyboard from US store, price including postage $455usd, best online price in Australia $699aud plus postage. Recommend retail price in Oz $999. Item is made in Taiwan so who is making all the profit?